Economic Stimulus Plan Stalls

December 17, 2001|By Glenn Kessler The Washington Post

WASHINGTON — House and Senate negotiators over the weekend made little progress in resolving differences over legislation to bolster the U.S. economy, dimming the possibility of an agreement before Congress ends the session later this week.

The key stumbling blocks remain taxes and spending, with Republicans pushing for deeper corporate and individual tax cuts and Democrats insisting on a big package of unemployment benefits and health insurance subsidies for displaced workers.

The dispute over the health insurance subsidy is rooted in philosophical differences between the parties, and neither side has found the formula to bridge the gap. Senate Finance Committee chairman Max Baucus, D-Mont., the chief Senate negotiator, on Saturday showed some flexibility on tax issues but only if Republicans and the White House in essence accepted the Democratic position on health insurance, sources said.

Senate Majority Leader Tom Daschle, D-S.D., told ABC's This Week Sunday, "I believe that there is at least a 50-50 chance that we can get a compromise this week. The clock is ticking."

Laying out the Democratic position, Daschle said: "If we can pass a robust package of support for these unemployed workers, making sure they have unemployment insurance extended, that they have health benefits ... then we'll look at additional business tax cuts, tax cuts for individuals."

"We'll do all we can to find ways to pass the plethora of different ideas that are on the table, as long as it's done with compromise in mind and a sense that we're not going to do long-term harm," he added.

On taxes, there are two main issues. The White House and House Republicans want to cut the 27 percent individual rate to 25 percent; Baucus offered to go to 26 percent, with the possibility of sweetening it in other ways, such as making the change retroactive to 2001. The 27 percent bracket affects the top 25 percent of taxpayers -- singles with taxable income above $28,000 and couples with taxable income above $47,000. Daschle has warned that any rate cut would be a hard sell to many Senate Democrats.

Another tax issue involves the corporate minimum tax, which was created 15 years ago to ensure that all companies pay at least some tax. House Republicans want to repeal the tax, while the White House last week scaled back its demand to just repealing parts of the tax. Baucus indicated Democrats would essentially accept the White House position.

Although staff negotiators met late into the night Saturday over health insurance, Democrats have remained firm in their opposition to the White House plan and insisted that the Democratic proposal be accepted.

The White House has proposed a health insurance tax credit, which unemployed individuals could use to pay up to 50 percent of their health care premiums -- as much as $294 a month for family coverage.

But Democrats view this plan as laying the groundwork for the administration's goal of health insurance tax credits for all Americans. While Democratic leaders have indicated they would accept a health insurance tax credit, they are pushing for higher payments -- up to 75 percent of premiums -- and want it available instead to the insurance companies or employers of workers who qualify for a federal plan that lets people keep company-provided health insurance after they lose their jobs.

If no agreement appears in sight, House Republican leaders have threatened to pass on Tuesday a scaled-down version of the stimulus plan the House narrowly approved earlier this year, hoping to pick up some Democratic votes and putting pressure on the Senate.

The Senate has been unable to pass a bill because procedural hurdles require at least 60 votes, a difficult task in a body with 50 Democrats, 49 Republicans and one independent. The White House has only won the support of three Senate Democrats for its stimulus plan.